Assume that Wal-Mart Stores, Inc. has decided to surface and maintain for 10 years a vacant lot next to one of its stores to serve as a parking lot for customers. Management is considering the following bids involving two different qualities of surfacing for a parking area of 12,000 square yards. Bid A: A surface that costs $5.75 per square yard to install. This surface will have to be replaced at the end of 5 years. The annual maintenance cost on this surface is estimated at 25 cents per square yard for each year except the last year of its service. The replacement surface will be similar to the initial surface.
Bid B: A surface that costs $10.50 per square yard to install. This surface has a probable useful life of 10 years and will require annual maintenance in each year except the last year, at an estimated cost of 9 cents per square yard.

Required:
Prepare computations showing which bid should be accepted by Wal-Mart. You may assume that the cost of capital is 9%, that the annual maintenance expenditures are incurred at the end of each year, and that prices are not expected to change during the next 10 years.

Bid A should be accepted

Explanation:

Bid A:

initial investment = $5.75 x 12,000 = -$69,000

cash flows years 1 - 4 = $0.25 x 12,000 = -$3,000

cash flow year 5 = -$69,000

cash flows years 6 - 9 = $0.25 x 12,000 = -$3,000

NPV using a 9% discount rate = -$129,881.21

Bid B:

initial investment = $10.50 x 12,000 = -$126,000

cash flows years 1 - 9 = $0.09 x 12,000 = -$1,080

NPV using a 9% discount rate = -$132,474.87

hi noah!

the first time you break a rule, you get a warning.

if you continue to break rules you get kicked out for a certain amount of time.

so, to answer your question 1.

hope this buddy!

- courtney

1   all nations face the problem of scarcity because there are limited resources and unlimited wants. nations do not have enough factors of production to produce everything that their population wants. entrepreneurial resources initiate businesses to make new goods and services; labor resources produce goods and services.

2 there are four factors of production: natural resources, labor resources, capital resources, and entrepreneurial resources. natural resources are raw materials from nature that are used to produce goods. trees, water, and grains are natural resources. some natural resources, such as wheat and cattle, are renewable

3 wants

things that you do not need to have in order to survive, but would like to have

needs

things that you must have in order to survive

goods

physical products

services

tasks that a business perform for customers

resources

items that people can use to make or obtain what they need or want

determine

to settle or decide by choice of alternatives or possiblities

4 i really dont know